Mogherini pushes Kerry for energy chapter in TTIP

European Union foreign affairs chief Federica Mogherini yesterday (3 December) pushed for the inclusion of an energy chapter in the Transatlantic Trade and Investment Partnership (TTIP) during talks with US Secretary of State John Kerry.

The foreign affairs bosses met during the EU-US Energy Council. The meetings, the latest of which was held in Brussels, are part of a political, and practical, response to the Ukraine crisis.

Diplomats discussed measures to bolster EU energy security such as the “Freedom” floating liquefied natural gas (LNG) terminal in Lithuania, a new gas interconnection agreement between Finland and Estonia, and LNG terminals in Helsinki and Tallinn.

Diversifying routes and supplies of gas is vital to reduce the EU’s dependence on Russian natural gas. About 30% of the EU’s annual needs are supplied by Russia through Ukraine. In 2009, Russia turned off the taps, causing shortages in the EU.

The Council agreed that energy security is also underpinned by “open, competitive and transparent international energy markets,” according to a press release.

Mogherini argued that an energy chapter in the free trade agreement would “set a benchmark” in terms of transparent, rules based energy markets to the rest of the world, according to a senior EU official at the talks.

US and EU TTIP negotiators have discussed the possibility of an energy chapter. But the US, while it has not ruled out the idea, is less keen than the EU.

Under US law, the US can supply gas to countries with which it has free trade agreements. So, under TTIP, US energy companies could sell to the EU, the official said.

EURACTIV understands the US would prefer the market to drive supply. At the moment any US gas imports to the EU would likely be sold onto other markets, that pay higher prices.

The chapter would set an example of transparent, rules-based energy markets, the senior official said. “That’s the real significance, not any short term supply considerations,” the official added.

The Council said in its conclusions, it “welcomed the prospect of US liquefied natural gas exports in the future”.

It also welcomed the negotiations towards TTIP and the discussion of trade and investment issues relevant to energy but stopped short of calling for a dedicated chapter in the EU-US trade deal.

Any energy chapter in TTIP would likely draw criticism from environmental campaigners, many of whom are already opposing the deal on the grounds it will lower EU environmental standards.

Fracking boom

The US began producing large amounts of oil and gas in the mid-2000s, with the fracking boom delivering further, significant supplies.

An EU TTIP negotiating document, leaked in July, revealed that the EU wants access to US natural gas supplies and crude oil exports.

The US, which has overtaken Saudi Arabia as the world’s largest oil and gas producer, banned crude exports in 1975 to ensure reserves in the case of an Arab oil embargo.

Members of the Organisation of Arab Petroleum Exporting Countries initiated an embargo, pushing up prices in the US in 1973.

Background

An illustration on how Gazprom uses the price of gas as a political weapon was provided in the context of the unfolding Ukraine crisis.

Ukraine was paying Gazprom a price of $400 per thousand cubic metres (tcm)under an agreement signed under former Prime Minister Yulia Tymoshenko, back in 2009.

Moscow dropped the price to $268.50 after then-President Viktor Yanukovich turned his back on a trade and association agreement with the European Union last year, but reinstated the original price after he was ousted in February.

Negotiations between the US and the EU on the Transatlantic Trade and Investment Partnership (TTIP) started in July 2013.

If successful, the deal would cover more than 40% of global GDP and account for large shares of world trade and foreign direct investment. The EU-US trade relationship is already the biggest in the world.

TTIP would be the biggest bilateral trade deal ever negotiated, resulting in millions of euros of savings for companies and creating hundreds of thousands of jobs. It is claimed that the average European household would gain an extra €545 annually, and that Europe's economy would be boosted by around 0.5% of GDP, if such a deal was fully implemented.